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1971 (6) TMI 56
Issues Involved:
1. Validity of the arbitration agreement and terms of settlement.
2. Locus standi of the shareholders to intervene.
3. Powers and functions of the Special Officer.
4. Compliance with procedural requirements under the Arbitration Act, 1940.
5. Validity of signatures on the terms of settlement.
Issue-wise Detailed Analysis:
1. Validity of the Arbitration Agreement and Terms of Settlement:
The court examined the arbitration agreement dated July 31, 1971, annexed to the terms of settlement. It was noted that the agreement stipulated that all interim orders, including the appointment of joint receivers, would stand vacated. The joint receivers were to hand over possession of the company's assets to a Special Officer appointed by a prior court order. However, the court found that the terms of settlement were not properly signed by all necessary parties, and there was no petition before the court to refer the matters in suit to arbitration as required by Section 21 of the Arbitration Act, 1940. Consequently, the terms of settlement were rejected.
2. Locus Standi of the Shareholders to Intervene:
The court addressed the objections raised by Mr. Deb on behalf of some shareholders of the defendant company. Mr. Deb argued that the shareholders had a significant interest in the company's affairs due to the absence of directors and the alleged collusion among certain parties. The court acknowledged that the shareholders could legitimately intervene to protect their interests, especially when the company's management was under the control of a Special Officer appointed by the court. The court granted leave to the shareholders to intervene in the matter.
3. Powers and Functions of the Special Officer:
The court discussed the role and powers of the Special Officer, noting that such appointments are made to prevent deadlocks in the company's management. The Special Officer's powers must be exercised under the supervision of the court and should aim to protect the company's interests. The court emphasized that the Special Officer should seek directions from the court before taking any controversial steps. The court found that the Special Officer in this case was attempting to gain full control over the company without proper court sanction, which was unacceptable.
4. Compliance with Procedural Requirements under the Arbitration Act, 1940:
The court highlighted the procedural requirements under Section 21 of the Arbitration Act, 1940, which mandates a written application to refer matters to arbitration. The court noted that no such petition had been filed in this case, and the attempt to present a petition during the proceedings was not entertained. The court held that the terms of settlement could not be filed without complying with the procedural rules.
5. Validity of Signatures on the Terms of Settlement:
The court examined the signatures on the terms of settlement and found several issues. One partner of the plaintiff firm signed the terms, but Mr. Deb argued that both partners should have signed, citing Section 19(2)(c) of the Partnership Act, 1932. The court rejected this argument, stating that the provision only relates to the implied powers of partners and does not prohibit one partner from signing on behalf of the firm in referring a dispute to arbitration. However, the court upheld the objection regarding the capacity in which B.B. Sinha signed the terms, noting that it was not properly indicated. The court concluded that the signatures on the terms of settlement were not valid, further justifying the rejection of the terms.
Conclusion:
The court rejected the terms of settlement and the arbitration agreement due to procedural non-compliance, improper signatures, and the need for the Special Officer to seek court directions before taking significant actions. The shareholders were granted leave to intervene, and the court emphasized the importance of protecting the company's interests through proper judicial oversight. There was no order as to costs.
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1971 (6) TMI 55
Issues Involved
1. Competence of the legislative power of the Central Legislature under section 34(1)(c) of the Estate Duty Act.
2. Discrimination and repugnance of section 34(1)(c) to Article 14 of the Constitution of India.
Issue-Wise Detailed Analysis
1. Competence of the Legislative Power
The petitioner challenged the legality of section 34(1)(c) of the Estate Duty Act, arguing that it was beyond the legislative competence of the Central Legislature. The contention was that estate duty should be levied only on the property passing on the death of the deceased, as per entry No. 87 in List I and the definition of estate duty in Article 366(9) of the Constitution. The petitioner argued that section 34(1)(c) improperly aggregated the estate of the lineal descendant, Krishna Prasad, with the deceased's estate, which did not pass on death.
The court held that Parliament had the exclusive power to legislate on estate duty under entry No. 87 in the Union List. The term "estate duty" includes the power to legislate the manner in which the rates of estate duty are fixed. Section 34(1)(c) was deemed a provision for fixing estate duty rates, not levying duty on the property of the lineal descendant. The aggregation was only for rate determination, and the duty was payable on the deceased's property. The court found no merit in the argument that the power to make law regarding estate duty did not include the power to fix the rate. Therefore, section 34(1)(c) was within the legislative competence of Parliament.
2. Discrimination and Repugnance to Article 14
The petitioner argued that section 34(1)(c) was discriminatory and violated Article 14 of the Constitution, which guarantees equality before the law. The claim was that the section prescribed a unique procedure for imposing tax on Mitakshara joint family members, different from Dayabhaga school members, without reasonable classification or nexus to the object sought to be achieved.
The court explained that "equal protection of laws" means equal treatment in similar circumstances. It acknowledged that the principle of equality does not require universal application of every law to all persons, as varying needs necessitate separate treatment. The court examined the object of the Estate Duty Act, which aimed to reduce wealth inequalities.
It found that the classification between Mitakshara and Dayabhaga schools was based on substantial differences in the incidents attached to joint Hindu families under these laws. In Mitakshara, sons acquire an interest in ancestral property at birth and take it by survivorship, whereas, in Dayabhaga, sons acquire property rights only upon the father's death. This distinction justified the application of section 34(1)(c) to Mitakshara families to remove inequality in estate duty rates.
The court cited the Supreme Court's decision in Venugopala Ravi Varma Rajah v. Union of India, which upheld differential tax treatment based on reasonable classification. The classification in section 34(1)(c) was found to have a rational relation to the object of the Estate Duty Act, thus not violating Article 14.
The court agreed with the Madras High Court's decision in Ramanathan Chettiar v. Assistant Controller of Estate Duty, concluding that section 34(1)(c) was neither discriminatory nor repugnant to Article 14.
Conclusion
Both contentions raised by the petitioner were rejected. The court held that section 34(1)(c) of the Estate Duty Act was within the legislative competence of Parliament and did not violate Article 14 of the Constitution. The writ petition was dismissed with costs.
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1971 (6) TMI 54
Issues:
1. Determination of whether the work undertaken by the assessee is a works contract or a sale of goods.
Analysis:
The judgment delivered by the High Court of Andhra Pradesh involved two revisions filed by the assessee against the Sales Tax Appellate Tribunal's order confirming the Deputy Commissioner's decision. The dispute revolved around whether the transactions carried out by the printing press constituted a works contract or a sale of goods. The petitioner, a printing press named M/s. S.R.P. Works and Ruby Press, supplied cinema tickets to customers based on orders specifying paper type and quantity. The assessing authority assessed the value of paper only, granting exemption for printing charges as labor costs. However, the Deputy Commissioner revised the order, considering the transactions as sales of finished goods. The Tribunal upheld this assessment, leading to the petitioner's appeal. The petitioner argued that the transactions were works contracts or, alternatively, consisted of two distinct contracts for paper supply and printing charges. The Court analyzed the orders placed by customers, which clearly indicated the intention for the supply of finished products, not just paper. Despite break-up figures in bills, the Court emphasized that the main question was whether there were separate contracts for paper supply and printing or a single contract for finished goods.
The Court further examined the nature of the contract to determine if it qualified as a works contract. Referring to the definition of "works contract" under the Act, the Court highlighted that such contracts involve construction, improvement, or repair of immovable or movable property. In this case, the printing of cinema tickets did not fall under the scope of "fitting out, improving, or repairing" movable property. Citing a similar case precedent, the Court concluded that transactions resulting in the transfer of property in finished goods, like cinema tickets, did not constitute a works contract. Instead, they were deemed as sales under the Andhra Pradesh General Sales Tax Act. The Court dismissed the revisions, upholding the Tribunal's findings and ordering costs to be paid by the petitioner.
In conclusion, the High Court of Andhra Pradesh determined that the transactions carried out by the printing press, involving the supply of cinema tickets, were not works contracts but sales of goods. The Court emphasized the intention of the parties, as evidenced by the orders, and clarified that the property in the goods passed to the buyer upon delivery of the finished products. The judgment underscored the distinction between works contracts and sales, ultimately affirming the Tribunal's decision and dismissing the revisions filed by the assessee.
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1971 (6) TMI 53
The respondents, registered dealers under the Bombay Sales Tax Act, claimed deductions under sections 9(1) and 8(b). The court accepted their consolidated declarations as support for their claim. The court held that the information provided in the consolidated form met the legal requirements. The burden of proof for deductions lies on the assessee, not the department. The petition was dismissed with costs.
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1971 (6) TMI 52
Issues:
1. Liability of a partnership firm for sales tax under the Tamil Nadu General Sales Tax Act.
2. Validity of an order of distraint issued against the father of a partner of the firm.
3. Interpretation of rule 44 of the Rules under the Act regarding incapacitated persons.
4. Application of section 24 of the Act for recovery of tax and issuance of distraint notice.
Analysis:
1. The judgment concerns the liability of a partnership firm for sales tax under the Tamil Nadu General Sales Tax Act. The firm, M. Purushotham and Co., ceased business in 1962. Disputes arose regarding sales tax assessments for the years 1958-59 and 1959-60. While appeals were pending, an order of distraint was issued in 1966 against the father of one of the partners.
2. The main issue was the validity of the distraint order against the father as the guardian of the partner. The petitioner argued that the partner was not incapacitated and could manage his affairs, making the notice irregular. The government pleader clarified that the distraint was directed at the partner's belongings in the father's custody, not the father's personal assets.
3. Rule 44 of the Rules under the Act deals with incapacitated persons for whom a guardian can act. The rule requires the person to be of unsound mind or incapable of managing their affairs. In this case, the partner's physical disability (inability to walk) was cited, but his mental capacity was not questioned, making rule 44 inapplicable.
4. The judgment also analyzed the application of section 24 of the Act for tax recovery. The government invoked section 24(2) to recover tax as an arrear of land revenue, leading to the distraint notice. The court clarified that the notice was aimed at the partner's assets in the father's possession, not the father's own property.
In conclusion, the court found that the notice, though not ideal, did not warrant further legal action as it targeted the partner's assets held by the father. The judgment emphasized the distinction between the partner's liabilities and the father's personal assets, ultimately dismissing the need for additional orders in the writ petition.
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1971 (6) TMI 51
The Bombay High Court dismissed the petition under section 34(2) of the Bombay Sales Tax Act, 1953, as the contract in question was determined to be for a work of art and not a sale of goods. The court found that the contract involved the skill of an artiste and upheld the Tribunal's decision without the need for a reference. The attempt to split the price between sale of goods and production of a work of art was unsuccessful. The petition was dismissed and the Rule discharged with costs.
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1971 (6) TMI 50
Issues:
Extension of time for filing an appeal before the Appellate Assistant Commissioner of Sales Tax; Justification for condoning the delay in filing the appeal; Interpretation of sufficient cause for not filing the appeal within the prescribed period; Whether the Tribunal was correct in law in holding that the respondent was justified in not filing the appeal before knowing a specific Supreme Court decision.
Analysis:
The High Court was asked to determine whether the Sales Tax Tribunal was justified in extending the time for filing an appeal to the Appellate Assistant Commissioner beyond the prescribed period. The Sales Tax Officer assessed the respondents on 6th October 1965, and the period for filing an appeal expired on 5th December 1965. The respondents filed the appeal on 29th April 1966, more than four months late. The Assistant Commissioner dismissed the appeal as time-barred, leading the respondents to appeal to the Sales Tax Tribunal, which found sufficient cause for the delay and remanded the appeal for consideration on merits. The Commissioner filed a petition questioning the Tribunal's decision, arguing that the delay condonation was unjustified and challenging the legal basis for delaying the appeal until a specific Supreme Court decision was known.
The main issue raised in the petition was whether the Tribunal's decision to condone the delay in filing the appeal was justified. The High Court opined that this did not involve a question of law and thus rejected the petition. However, the Court found the Tribunal's decision reasonable. The respondents claimed they waited for a specific Supreme Court judgment before filing the appeal, acting promptly after the judgment was published. Referring to a previous Supreme Court case, the Court noted that the proper remedy for such situations was to file an appeal or seek revision with a plea for delay condonation based on the discovery of a mistake following a relevant Supreme Court judgment. The Court found the respondents' actions aligned with this legal principle, making the petition futile.
In conclusion, the High Court dismissed the petition, upholding the Tribunal's decision to extend the time for filing the appeal. The Court found the respondents' actions in line with legal precedents and rejected the Commissioner's challenge to the delay condonation. The petition was dismissed, and the rule was discharged with costs.
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1971 (6) TMI 49
The respondents, registered dealers under the Central Sales Tax Act, supplied goods outside Maharashtra but were assessed as agents of buyers. They claimed exemption under section 5(2) of the Act, which was accepted. The Tribunal rejected the department's contention that sales fell under section 3 for inter-State trade. The court upheld the Tribunal's decision, citing precedent, and dismissed the petition with costs.
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1971 (6) TMI 48
Issues:
1. Validity of the warrant issued for the attachment of movables for recovery of sales tax arrears.
2. Interpretation of clauses (a) and (b) of subsection (1) of section 386 of the Code of Criminal Procedure regarding the recovery of fines.
Analysis:
The judgment pertains to a revision petition under section 13(4) of the Mysore Sales Tax Act, 1957, challenging an order for the attachment of movables to recover sales tax arrears. The petitioner contested the enforcement of the demand made under the provisional assessment order for the year 1968-69 after a final assessment was completed. However, a memo filed by the respondent clarified that the recovery application related only to the tax due for the final assessment of 1967-68, rendering the petitioner's contention moot.
Regarding the validity of the warrant issued for recovery, the petitioner's counsel argued that the warrant under clause (a) of section 386 of the Code of Criminal Procedure applied only to offenders sentenced to pay fines, while a defaulter like the petitioner should be subject to a warrant under clause (b) issued to the District Collector. The court rejected this argument, deeming the distinction between offender and defaulter as baseless. It emphasized that the Magistrate, under section 13(3)(b) of the Sales Tax Act, could recover dues as if they were fines imposed by him, placing the petitioner in the position of an offender or defaulter for recovery purposes.
In conclusion, the court dismissed the revision petition, upholding the validity of the warrant issued for the attachment of movables to recover sales tax arrears. The court rejected the petitioner's argument regarding the distinction between offenders and defaulters for the purpose of recovery, emphasizing the Magistrate's authority to recover dues under the Sales Tax Act as fines imposed by him, regardless of the classification of the petitioner.
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1971 (6) TMI 47
Issues:
1. Validity of the notice of attachment issued for tax arrears under the Tamil Nadu General Sales Tax Act and the Central Sales Tax Act.
2. Proper assessment procedures under the Madras Revenue Recovery Act.
3. Applicability of the Madras Revenue Recovery Act after final assessment.
4. Claiming relief in a higher forum after assessment.
5. Jurisdiction of authorities under the Tamil Nadu General Sales Tax Act.
Analysis:
The petitioner, a partner of an oil-mill, filed a writ petition challenging a notice of attachment for tax arrears under the Tamil Nadu General Sales Tax Act and the Central Sales Tax Act. The petitioner argued that the assessment order was improper and illegal, specifically mentioning issues related to non-production of C forms and incorrect tax rates. The petitioner sought a writ of prohibition to prevent enforcement of the notice under the Madras Revenue Recovery Act.
The court clarified that the Madras Revenue Recovery Act is applicable only after the assessment proceedings are concluded. Once a final assessment order is made, the authorities can proceed with recovery under the Revenue Recovery Act. The court emphasized that the aggrieved party cannot challenge the enforcement process based on errors in the assessment order, as there are avenues for redress through appeals. In this case, the petitioner failed to appeal the original assessment order, making it final in the eyes of the law, and the authorities were justified in invoking the Revenue Recovery Act for recovery.
The court rejected the petitioner's argument that non-production of C forms should entitle them to relief in a higher forum, stating that one cannot benefit from their own inaction. Since the petitioner did not utilize statutory remedies to appeal the assessment order, the authorities were within their jurisdiction to enforce the final order through the Revenue Recovery Act. It was deemed improper for the authorities to correct a final assessment order, and the petitioner's failure to avail remedies precluded them from seeking relief under Article 226.
Ultimately, the court discharged the rule nisi and dismissed the writ petition, emphasizing that the authorities had not erred in their public duty and had acted within the provisions of the Tamil Nadu General Sales Tax Act. The petitioner's failure to challenge the assessment order through proper channels prevented them from obtaining relief through a writ of prohibition.
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1971 (6) TMI 46
Issues:
- Alleged tax evasion through purchase and sale of rice
- Violation of principles of natural justice in assessment process
Analysis:
The judgment involves a case where the petitioner, a rice dealer in Andhra Pradesh, was suspected of evading taxes by purchasing and selling rice in Madras. The Commercial Taxes Department initiated an investigation due to the petitioner's failure to submit required turnover returns. The assessing officer concluded that the petitioner had purchased rice from a specific company based on witness statements and credit bills. However, the petitioner denied these allegations, claiming that the company was actually his debtor, as evidenced in civil proceedings. The petitioner argued that he was not given a fair opportunity to present evidence and counter the department's claims, alleging a violation of natural justice.
The High Court found that the assessing officer did not handle the case justly and reasonably. The court emphasized the importance of providing a fair trial and opportunity for the accused to defend themselves, especially in cases with circumstantial evidence. The court criticized the reliance on unsigned credit bills and lack of proper scrutiny of evidence. It highlighted the necessity of establishing a clear seller-buyer relationship with supporting evidence to assess tax liability correctly, which was lacking in this case. The court also referenced a previous case where the failure to observe principles of natural justice led to the original assessment order being set aside.
In light of the principles of natural justice, the High Court directed the petitioner to withdraw the appeal before the appellate authority and set aside the impugned assessment order. The court allowed the assessing authorities to initiate fresh proceedings but emphasized the importance of providing the petitioner with a fair opportunity to present his case and evidence. The judgment concluded by allowing the writ petition, highlighting the importance of upholding natural justice principles in tax assessment procedures.
Overall, the judgment addresses issues of tax evasion allegations, violation of natural justice principles in assessment procedures, and the importance of fair trials and evidence scrutiny in tax assessments.
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1971 (6) TMI 45
Issues:
- Whether the sales of coir-yarn from one state to another qualify as inter-State trade under article 286(1)(b) of the Constitution.
- Whether the movement of goods was occasioned by a covenant or incident of the contract of sale.
- Whether the sales were exempt from tax under article 286(1)(b) of the Constitution.
Analysis:
1. The tax revision cases involved dealers in coir-yarn residing in one state who sold goods to firms in another state. The dealers contended that the sales were in the course of inter-State trade and thus exempt from tax under article 286(1)(b) of the Constitution.
2. The Sales Tax Officer argued that there was no prior contract of sale leading to the movement of goods between states. The Supreme Court precedent established that for sales to be taxable under the Act, the movement of goods must be occasioned by the contract of sale.
3. The key issue was whether the movement of goods from one state to another was occasioned by a covenant or incident of the contract of sale. The Supreme Court's interpretation emphasized that the sale must occasion the movement of goods for it to qualify as inter-State trade.
4. The court referred to precedents such as Tata Iron and Steel Co. Ltd. v. S.R. Sarkar and Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer to determine that the movement of goods should be a result of the contract of sale to be considered inter-State trade.
5. The court held that the movement of goods from one state to another was indeed occasioned by the contracts of sale between the dealers and the firms. The written agreements between the parties indicated a clear intention to sell and deliver goods, making the movement of goods incidental to the sale.
6. The argument that the dealers could have sold the goods to others did not hold weight as the movement of goods was a direct result of the contract of sale. Any diversion of goods would constitute a breach of contract, reinforcing that the movement was indeed incidental to the sale.
7. Ultimately, the court allowed the revisions, ruling that the sales qualified as inter-State trade under article 286(1)(b) of the Constitution. The movement of goods was deemed to be occasioned by the contracts of sale, exempting the transactions from tax liability.
In conclusion, the judgment clarified the criteria for sales to qualify as inter-State trade under the Constitution and emphasized the significance of the contract of sale in determining the tax liability of such transactions.
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1971 (6) TMI 44
Issues Involved:
1. Applicability of Section 446(1) of the Companies Act, 1956, to proceedings initiated by the Income-tax Officer.
2. Jurisdiction of the Company Court over Income-tax proceedings.
3. Validity of notices issued under the Income-tax Act during the winding-up process.
Detailed Analysis:
1. Applicability of Section 446(1) of the Companies Act, 1956, to Proceedings Initiated by the Income-tax Officer:
The primary issue was whether Section 446(1) of the Companies Act, 1956, applies to proceedings initiated by the Income-tax Officer against a company in liquidation. The applicant argued that there is a conflict of judicial opinion on this matter and sought the court's direction. The respondent contended that Section 446(1) does not apply to such proceedings and that the Income-tax Officer has jurisdiction to issue the notices without the leave of the court.
The court examined several decisions to determine the scope of the term "other legal proceeding" under Section 446(1). It referred to the Federal Court's decision in Governor-General in Council v. Shiromani Sugar Mills Ltd., which emphasized that "no narrow construction should be placed upon the words 'or other legal proceeding' in section 171 [equivalent to Section 446]." The court also considered the Supreme Court's decision in Damji Valji Shah v. Life Insurance Corporation of India, which held that Section 446(1) does not apply to all legal proceedings and that the jurisdiction of the company court is limited to matters it is empowered to entertain and dispose of under Section 446(2).
2. Jurisdiction of the Company Court Over Income-tax Proceedings:
The court concluded that Section 446(1) applies only to legal proceedings that fall within the jurisdiction of the company court as enumerated in Section 446(2). This section grants the company court jurisdiction over suits or proceedings by or against the company, claims made by or against the company, applications under Section 391, and questions of priorities or other questions related to the winding-up process.
The court noted that assessment or reassessment proceedings and proceedings to impose penalties under the Income-tax Act do not fall within the ambit of Section 446(1) as they are not matters the company court is authorized to entertain and dispose of under Section 446(2). Therefore, these proceedings do not require the leave of the winding-up court.
3. Validity of Notices Issued Under the Income-tax Act During the Winding-up Process:
The court evaluated the validity of the notices issued by the Income-tax Officer under Sections 156, 274 read with 271, 274 read with 273, and 148 of the Income-tax Act. The applicant sought to have these notices declared void and set aside if Section 446(1) was found applicable. However, based on the court's interpretation of Section 446(1) and its limited applicability to proceedings within the company court's jurisdiction, the court held that the notices issued by the Income-tax Officer were valid and did not require the leave of the winding-up court.
Conclusion:
The court dismissed the applications, holding that Section 446(1) of the Companies Act, 1956, does not apply to assessment, reassessment, or penalty proceedings under the Income-tax Act. These proceedings do not fall within the jurisdiction of the company court under Section 446(2), and thus, do not require the leave of the winding-up court. The court made no order as to costs.
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1971 (6) TMI 42
Issues Involved:
1. Jurisdiction of the Court
2. Ceasing of Business by the Company
3. Ultra Vires Acts and Substratum of the Company
4. Validity of Directors' Appointment
5. Alteration of Object Clauses
6. Allegations of Bad Faith and Ulterior Motives
7. Offers to Purchase Shares from Minority Shareholders
Detailed Analysis:
1. Jurisdiction of the Court:
The company argued that as it is a foreign company registered in the United Kingdom, the High Court of Bombay has no jurisdiction. However, under Section 2(7) of the Companies Act, 1956, a "body corporate" includes a company incorporated outside India. The company qualifies as an "unregistered company" under Section 582, and under Section 584, it can be wound up as it has ceased to carry on business in India. The court rejected the contention of lack of jurisdiction.
2. Ceasing of Business by the Company:
From 1910 to 1942, the company carried on its business of prospecting for, refining, producing, and dealing in petroleum and other mineral oils. Post-1942, due to war and destruction of its properties, the company ceased its primary business and only engaged in litigation for compensation until 1965. From 1965 to 1967, the company carried on badli business and from 1967 to 1970, it invested in shares of other companies. The court had to determine whether these activities were intra vires or ultra vires.
3. Ultra Vires Acts and Substratum of the Company:
The court examined the objects clause in the memorandum of association and concluded that the main and dominant object was the petroleum business. The badli business and investments in other companies were ultra vires and not within the objects clause. The company had ceased to carry on its main business and had engaged in ultra vires activities, indicating that its substratum was gone.
4. Validity of Directors' Appointment:
The appointment of directors on 5th April 1966 was challenged as they did not hold the required qualification shares within two months of their appointment. They continued to function without valid re-election. The court found that the directors were invalidly elected and their acts, except for calling general meetings, were invalid. This affected the validity of the resolution altering the memorandum on 8th December 1970.
5. Alteration of Object Clauses:
During the pendency of the petition, the company altered its object clauses to include a variety of businesses and introduced an independent construction clause. The court was not convinced of the bona fides of the new business activities. The alteration was also challenged in a pending suit, and the court decided that the petition should not be summarily dismissed without further inquiry.
6. Allegations of Bad Faith and Ulterior Motives:
The petitioners alleged that the directors used company funds for personal gain and engaged in ultra vires activities for self-aggrandizement. The court noted that an act within the scope of the memorandum is not ultra vires due to directors' ulterior motives. However, since the business activities were ultra vires, the question of ulterior motives would be examined at the final hearing.
7. Offers to Purchase Shares from Minority Shareholders:
During the hearing, offers and counter-offers were made to purchase shares from minority shareholders. The court was not impressed by the majority shareholders' offers to buy out the minority, as the petitioners were entitled to seek winding up due to the ultra vires activities and invalid appointment of directors.
Conclusion:
The court admitted the petition for winding up the company, finding prima facie that the company had ceased to carry on its main business, engaged in ultra vires activities, and was managed by invalidly appointed directors. The petition was set for further inquiry and hearing on 2nd August 1971. The company was ordered to pay the petitioners' costs up to the stage of admission, and the petition was to be advertised in specified publications.
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1971 (6) TMI 40
Issues:
- Application for delivery of shares under section 113 of the Companies Act, 1956.
- Interpretation of section 113 regarding the obligation of the company to deliver shares.
- Comparison with English Companies Act of 1948.
- Construing sub-sections of section 113 strictly for penal consequences.
Analysis:
The judgment pertains to an application made by Raigarh Trading Co. Ltd. against Asiatic Oxygen Ltd. & Ors. for the delivery of equity shares or issuance of duplicate certificates. The dispute revolves around whether the company delivered the shares to the petitioner or not. The court acknowledged the difficulty in determining this based on affidavit evidence and highlighted the need for a trial to establish the facts.
However, the crucial aspect of the judgment revolves around the interpretation of section 113 of the Companies Act, 1956. The court emphasized that the Act does not provide a special remedy for the delivery of shares; instead, it mandates the filing of a suit for such matters. Section 113 imposes an obligation on the company to have certificates ready for delivery within specified timelines after allotment or transfer of shares, with penalties for non-compliance.
Drawing a comparison with the English Companies Act of 1948, the court noted the specific rules regarding applications for delivery of certificates or debentures. The judge rejected the argument that section 113 authorizes a person to apply for the delivery of shares, emphasizing that the provision strictly requires the company to have the shares ready for delivery, not necessarily to deliver them.
Furthermore, the judgment stressed the need to interpret section 113 strictly, citing precedents and legal principles. The court concluded that sub-section 3 of the Act does not empower an individual to obtain an order for the delivery of shares, deeming the application in question as misconceived and dismissing it. The judgment did not award costs in this case but stayed the operation of the order for four weeks.
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1971 (6) TMI 39
Issues:
1. Admissibility of answers given by officers of Barclays Bank Ltd. to Board of Trade inspectors during an investigation into certain companies as evidence in an action against Barclays Bank Ltd.
Analysis:
The judgment by Brightman, J. addresses the admissibility of answers provided by officers of Barclays Bank Ltd. to Board of Trade inspectors during an investigation into specific companies as evidence in an action against Barclays Bank Ltd. The answers in question were given by Mr. Hockley and Mr. Cooper, officers of Barclays Bank Ltd., during two separate instances. The first set of answers, given by Mr. Cooper on July 18, 1960, were not provided under oath and are deemed inadmissible. However, the second set of answers given by Mr. Cooper on February 22, 1961, were provided under oath and are considered admissible.
Regarding the admissibility of the answers provided under oath by Mr. Cooper in transcript no. 18, the judgment refers to the Companies Act, 1948. Section 167(2) of the Act, read with sub-section (5), empowers Board of Trade inspectors to examine a company's bankers on oath. It is established that Mr. Cooper, being an officer of the company's bankers, attended the examination with the authority of Barclays Bank Ltd. Consequently, his answers are deemed admissible as evidence against the bank under section 50 of the Companies Act, 1967.
In contrast, the judgment distinguishes the admissibility of answers in transcript no. 3, which were not provided under oath. It is outlined that only answers given under oath in response to questions posed in exercise of the powers under section 167 are admissible under the Act of 1967. Answers obtained through informal questioning by Board of Trade inspectors, as in the case of transcript no. 3, are deemed inadmissible as they fall outside the scope of section 50 of the Act of 1967. The judgment concludes that while the answers in transcript no. 18 are admissible as evidence against Barclays Bank Ltd., the answers in transcript no. 3 are not admissible in the legal proceedings.
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1971 (6) TMI 38
Issues Involved:
1. Whether the accused were the principal officers of the company during the relevant period.
2. Whether the company had distributed dividends and deducted the tax.
3. Whether the tax was remitted to the credit of the Central Government within the specified time.
4. Applicability of the prosecution under the Income-tax Act, 1961, for an offence allegedly committed under the Income-tax Act, 1922.
5. Protection under Article 20(1) of the Constitution.
Detailed Analysis:
1. Whether the accused were the principal officers of the company during the relevant period:
The common question in both cases was whether the accused were the principal officers of the company during the relevant period. The complainant argued that the accused were the principal officers when the tax was deducted. The appellate judge initially held that C.L. Joseph, as the managing director, was the principal officer. However, the judgment clarified that the managing director does not fall under the categories enumerated under section 2(35)(a) or 2(35)(b) of the Income-tax Act, 1961. The managing director must be served with a notice by the Income-tax Officer to be treated as the principal officer, which was not done in this case.
2. Whether the company had distributed dividends and deducted the tax:
The evidence regarding the deduction of tax was found to be confusing and insufficient. Exhibit P-4 indicated that no amounts were deducted at source on the dividends. The mode of distribution of dividends, as per section 194 of the Income-tax Act, 1961, requires payment in cash or by cheque/warrant, which was not followed as the amounts were merely credited to the shareholders' accounts. Thus, the prosecution failed to prove that dividends were declared and distributed or that tax was deducted.
3. Whether the tax was remitted to the credit of the Central Government within the specified time:
The prosecution argued that the tax was not remitted within the specified time, but since the evidence of deduction itself was lacking, this point became moot. The obligation to remit the tax arises only if it is shown that the tax was deducted, which was not established.
4. Applicability of the prosecution under the Income-tax Act, 1961, for an offence allegedly committed under the Income-tax Act, 1922:
The judgment clarified that the offence, if any, was committed under section 51(a) of the Income-tax Act, 1922, and not under the 1961 Act. Section 276(d) of the 1961 Act requires that the deduction and payment of tax should be under the provisions of Chapter XVII-B of the 1961 Act. Since the alleged offence was complete under the 1922 Act, the prosecution should have been initiated under that Act, and it cannot be deemed to continue under the 1961 Act.
5. Protection under Article 20(1) of the Constitution:
The lower court's finding that the accused were protected under Article 20(1) of the Constitution was upheld. This article protects individuals from being prosecuted under a law that was not in force at the time the alleged offence was committed. Since section 276B was introduced only from April 1, 1969, and the failure to deduct the tax occurred before that date, the accused could not be prosecuted under this section.
Conclusion:
The appeals were dismissed as the prosecution failed to prove that the accused were the principal officers, that dividends were declared and distributed, and that tax was deducted. The alleged offence was under the 1922 Act, and the prosecution under the 1961 Act was not valid. Additionally, the accused were protected under Article 20(1) of the Constitution.
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1971 (6) TMI 37
Issues Involved
1. Right to serve notice under section 209(1) of the Companies Act 1948.
2. Validity of the conversion shares under section 209.
3. Inclusion of nominated shares under section 209.
4. Calculation of the requisite majority under section 209.
5. Validity of the notice given by T. & C. under section 209.
6. Exercise of the court's discretion under section 209.
Detailed Analysis
1. Right to Serve Notice Under Section 209(1) of the Companies Act 1948
The applicants claimed that T. & C. had no right to serve notice under section 209(1) of the Companies Act 1948 to acquire the ordinary shares in Simo held by them. The court examined the offer document sent by Wm. Brandt's Sons & Co. Ltd. on behalf of T. & C., detailing the share and stock conversion process and the conditions under which shares could be acquired.
2. Validity of the Conversion Shares Under Section 209
The applicants argued that the conversion shares should be excluded from the ambit of section 209, asserting that the section refers only to shares actually in issue at the date of the offer. The court, however, concluded that the wording of section 209 is wide enough to include conversion shares, stating, "I do not accede to the argument that shares must necessarily be in issue at the offer date in order to come within section 209."
3. Inclusion of Nominated Shares Under Section 209
The applicants contended that the nominated shares, which were allotted directly to T. & C., should be excluded as they were never held by the stockholders. The court found that the offer document involved a scheme or contract including the transfer of an absolute right to an allotment of shares, stating, "I see no necessity for the narrow construction urged upon me by the applicants."
4. Calculation of the Requisite Majority Under Section 209
The court had to determine the correct date for counting the number of shareholders to ascertain whether the approving shareholders amounted to three-fourths of the total holders. The court decided that the most practicable date for counting heads was the date when the offer was made. The court concluded that T. & C. satisfied the requisite 75% majority even after deducting the holders of the committed 4,800,000 shares.
5. Validity of the Notice Given by T. & C. Under Section 209
The applicants argued that the notice given by T. & C. was defective as it did not refer to the attainment of the requisite majority in number. The court concluded that the prescribed form of notice did not require mentioning the numerical majority, stating, "I therefore conclude that such additional information was not regarded as essential by the statutory instrument in a case where the proviso is applicable."
6. Exercise of the Court's Discretion Under Section 209
The applicants urged the court to exercise its discretion against T. & C., arguing that the offer was more attractive to stockholders than to shareholders. The court rejected this argument, stating, "The terms of the actual offer gave no greater advantage to a person who was entitled to a share because he exercised his right to convert than to a person who was entitled to a share because he was already on the register."
Conclusion
The court did not make the declaration sought by the applicants, thereby allowing T. & C. to proceed with the acquisition of the shares under section 209.
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1971 (6) TMI 12
Issues:
1. Application for dispensing with deposit not disposed of properly.
2. Proper exercise of discretion under section 129 proviso.
3. Requirement of quasi-judicial manner in decision-making.
4. Hearing parties before disposing of the application.
5. Setting aside the appellate order and remanding the matter for proper hearing.
Analysis:
The judgment pertains to a Civil Rule challenging an appellate order passed by the Collector of Customs. The petitioner had appealed against a penalty imposed for short landing of materials, but the appeal was rejected for non-compliance with the deposit requirement under section 129 of the Customs Act, 1962. The petitioner had applied for dispensing with the deposit under the proviso of section 129, which allows for discretion if undue hardship is established. The Court emphasized that authorities must act in a quasi-judicial manner and hear the parties before making a decision under the proviso. It cited a Supreme Court case where the appellant was heard before a decision was made on reducing the deposit amount. In this case, the Court found that the petitioner was not given a hearing before the application was disposed of, leading to the appellate order being set aside. The matter was remanded for proper hearing in accordance with law, allowing parties to present their arguments.
The Court highlighted the importance of following a quasi-judicial approach in deciding on applications for dispensing with deposits under section 129 proviso. It noted that hearing the parties is crucial for determining undue hardship and exercising discretion properly. The judgment emphasized that applicants must be given an opportunity to present their case before a decision is made, as seen in a precedent set by the Supreme Court. The Court's decision to set aside the appellate order was based on the failure to provide a hearing to the petitioner before disposing of the application, underscoring the need for procedural fairness and adherence to legal requirements.
In conclusion, the Court made the Rule absolute, setting aside the appellate order and directing the matter to be reheard by the Appellate Officer under section 129 proviso in compliance with legal procedures. The judgment aimed to ensure that the parties' rights and contentions are preserved while emphasizing the necessity of a quasi-judicial approach and procedural fairness in decision-making processes related to dispensing with deposit requirements under the Customs Act.
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1971 (6) TMI 11
Issues Involved:
1. Validity of the interlocutory order refusing the petitioner's prayers made on June 20, 1969.
2. Validity of the Appellate Order dated September 17, 1969.
3. Validity of the final order of confiscation dated September 27, 1969.
Issue-wise Detailed Analysis:
1. Validity of the Interlocutory Order Refusing the Petitioner's Prayers Made on June 20, 1969:
The petitioner challenged the interlocutory order of the Collector of Customs, dated July 26, 1969, which refused two prayers: a certified copy of the forensic test report regarding the key and a summons to Messrs. Godrej and Boyce Manufacturing Company (P) Ltd. The petitioner contended that the refusal of these prayers resulted in a denial of a reasonable opportunity to substantiate his defense.
The Court held that the Collector was in error in refusing the disclosure of the forensic test report on the ground that it would only be disclosed if used against the petitioner. The Court emphasized that a document relevant to the case should be made available to the defense, and refusal on the ground that it does not support the prosecution is unjust.
Regarding the summons, the Court noted that the Collector misinterpreted Section 108 of the Customs Act, 1962, which allows for summoning any person necessary for giving evidence. The refusal to issue a summons for a defense witness was deemed an improper use of the powers under Section 108(1). The Court concluded that the refusal of these prayers materially prejudiced the petitioner in the adjudication proceeding.
2. Validity of the Appellate Order Dated September 17, 1969:
The petitioner disputed the Appellate Order which returned the memo of appeal on the ground that no appeal lies against an interlocutory order under Section 128 of the Customs Act, 1962. The Court acknowledged the argument that Section 128 is broad enough to include interlocutory orders. However, since the interlocutory order was found to be unsustainable, the Court did not find it necessary to decide this issue finally. The Appellate Order was effectively set aside as the interlocutory order itself was set aside.
3. Validity of the Final Order of Confiscation Dated September 27, 1969:
The petitioner challenged the final order of confiscation on two grounds. First, the order was passed in a proceeding where the petitioner was denied a reasonable opportunity to substantiate his defense due to the refusal of his prayers made on June 20, 1969. Second, the adjudicating authority disposed of the proceeding ex parte without giving further notice to the petitioner after the appeal was returned.
The Court held that the final order of confiscation could not be upheld as it followed an erroneous interlocutory order that denied the petitioner a reasonable opportunity to defend himself. Additionally, the Court found that the Collector acted improperly by disposing of the proceeding without giving further notice to the petitioner, thereby violating the petitioner's right to be heard.
Conclusion:
Both the interlocutory order dated July 26, 1969, and the final order of confiscation dated September 27, 1969, were set aside. The Collector of Customs was directed to proceed afresh with the adjudication in accordance with the law. The Court issued a writ in the nature of Certiorari in each case incorporating these directions, with no order as to costs.
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